Philip Anderson

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1. Which of the investment alternative: Provides the highest returns to the client? Provides the highest profits to Stuart&Co.? In order to find the right result for each question, I suppose the client of each situation will invest $10,000. I will make a lot of calculations to support my opinion. The process listed as Exhibit1, Exhibit2 and Exhibit 3. Both Alternative A and C will provide the highest returns to the client depending on the period of investment. In this case, A has the highest investment return (See Exhibit 3). In this situation, ending redeemable value (ERV=P (1+T) n) and gain on investment are higher than B and C. Other than that, the cost of investment (Cost investment = Initial payment+ Total Load or Commission) is lower than B and C. So, the ROI (ROI= (Gain on investment + Cost of investment)/cost of investment) is higher than B and C. This is because A has the highest initial payments, but B and C need to take the load out from the same initial payments. Moreover, A has a lower management fee. Instead, B has a higher load and management fee; C has a higher load. Alternative B will provide higher profits to Stuart & Co (See Exhibit 2).In this situation, the total profit of Stuart & Co. is the sum of load or commission and management fee. B is higher than A and C. This is because B requires paying load or commission at 5% to purchase. Besides, B has a high percentage management fee. 2. Which alternative should the top management of Stuart & Co. want Philip to recommend to his client? Is the company’s control system designed to ensure that choice? (The case mentions several measures used to reward the branch managers). I think alternative B is what the top management wants because it will bring the maximum profit for the company. The company’s control system is not designed to ensure this choice. For example, the company emphasis on” developing and nurturing profitable relationship with as many clients as possible, and the specific products and...
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